Germany’s ruling government should dramatically increase defense spending without delay, according to Moritz Schularick, the president of the Kiel Institute for the World Economy (IfW), an influential German think tank.
The president, who spoke with Süddeutsche Zeitung, said the Federal Republic should spend around 3 percent of gross domestic product on defense in the foreseeable future. Germany as of now does not even spend the mandatory 2 percent of GDP on defense, which is expected of all NATO members. Of all NATO members, only Poland spends 3 percent of its GDP on defense.
If Germany were to embark on spending 3 percent of its GDP on defense, it would amount to approximately €120 billion a year.
Schularick mentioned two options available to Germany to fund this rapid boost in spending. First, the government can either suspend the debt brake or second, decide on a new special fund for the development of the army
“Anyone who refuses to take out new loans for dogmatic reasons is putting his party above the country,” said Schularick, clearly addressing his message to Christian Lindner, the Free Democrat (FDP) finance minister who insists on austerity.
Under the debt brake enshrined in the 2009 constitution, only 0.35 percent of gross domestic product can be used for new borrowing. Sticking to the debt brake in the face of an extremely severe budget deficit has sparked a heated debate among the governing parties. In particular, the FDP, led by the finance minister, insists on deep cuts. The government spends huge sums on social welfare and its ballooning immigrant population.
Above all, the IfW president argued that Europe has neglected to invest in its security. This, in turn, has left it unable to support Ukraine against Russia without the help of the United States.
“However, given the instability of the United States, Europe needs to be able to defend itself in the foreseeable future,” he said.
He argues that Germany needs to lead the way in developing the continent’s defense industry. Additionally, increased spending on security would also boost economic growth, Schularick said, referring to tax breaks for companies and more investments.
In the interview, the institute’s director also said that Europe, including Germany, was under threat from Chinese imports. He pointed out that Europe already imports 40 times more electric cars from China than the United States. Schularick said he assumes that these imports would continue to grow, representing a threat to European investments and companies.
The Chinese government is subsidizing its industry with hundreds of billions of euros a year, which distorts competition, he further argued. The European Commission should investigate Chinese subsidies and react accordingly, with punitive tariffs if necessary, Schularick added.
